The stock market has gone way down and then way up over the past couple of years, but to Jack Ablin, Harris Private Bank's chief investment officer, those are just short detours on a long trip.
"I think we're stuck in a secular sideways market that started in 2000," Ablin said.
It may not be surprising, then, that Harris, a Bank of Montreal unit, has less enthusiasm than many of its counterparts for the strategy of buying stocks and holding them for the long run.
Ablin sees Harris' portfolio strategies as more active and tactical than those found elsewhere. He cites its "maximum growth" investment strategy, which is used for about a quarter of the $53.7 billion of assets under management and administration, as a good example.
The strategy lets Harris' advisers shift assets back and forth from cash into what they see as undervalued markets that have the potential to outperform over the subsequent 12 to 18 months, Ablin said.
That approach appears to be effective: While the S&P 500 index was up 19.3% from the beginning of 2009 through mid-December, Harris' maximum growth strategy led to a 22% gain. In 2008 the strategy yielded a loss of 34.5%, slightly better than the S&P's 37% decline.
Since 2001 the strategy has outperformed the S&P each year, by as little as 1.5 percentage points and as much as 7.5 percentage points, according to Harris.
That performance has helped the Chicago company increase its assets under management through market gains and inflows from investors. In the spring of 2003 its total assets under management were $23.7 billion; as of Nov. 30 they stood at $53.7 billion, according to the bank.
Harris' approach is noteworthy at a time when many are questioning the conventional buy-and-hold investment wisdom. After the dust settles from the market's plunge and subsequent surge, many institutions are likely to evaluate whether they should change their strategy, said David Twibell, president of wealth management at Colorado Capital Bank in Castle Rock.
"Buy-and-hold worked in the '80s and '90s because the market was moving higher," he said. "The risk was being out of market."
But over the past decade or so the market has merely zigzagged, said Twibell, whose unit manages about $100 million of assets. Though few banks appear to have made major changes to their asset allocation strategies as yet, the market crash could spur them to think anew in the coming months, he said.
Harris embraced a more active approach early in the decade, after having been a "bread-and-butter blue-chip stock and investment-grade bond house" for years, Ablin said.
Now, Harris is active but not hyperactive, he said. An average portfolio might be adjusted just half a dozen times a year. But each adjustment involves relatively large amounts — typically 5% to 10% of a portfolio.
Ablin said he believes in following the momentum within markets; he is not averse to holding cash as they are cycling down. He argues that $1,000 invested a decade ago in the S&P 500 would be worth $880 today excluding dividends, but that shifting it into three-month Treasury bills at the right times would have increased it to more than $2,200.
Ablin — who was a client running his own advisory firm — joined Harris in 2001 in an effort to differentiate its asset management approach. "If our business model was putting together a portfolio of 60 blue-chip stocks to beat the S&P, we and our clients were going to be disappointed," Ablin said. "That's why I was brought in."